northland chamber

LEADER COLUMN FEBRUARY 2011
Who would want to be a local body politician? Having a relatively high level of debt and needing to make some significant investment in infrastructure has created classic economic dilemma. There will only ever be a limit number of sources of income for a council and not all of these will be popular with all sectors of the community.

Obviously increased rates will always result in robust debate over the equity or otherwise of the existing rating system and to the Whangarei District Council’s credit they have recognised the need to re-examine current policy used to determine rates. Increasing the base from which rates are collected is another option and any initiative to grow the number of ratepayers has benefit. However r is currently little or no desire among developers to create new subdivisions particularly in light of policy regarding developer contributions (which are another revenue source).

Borrowing to invest in trans-generational infrastructure has its place if existing debt levels are sustainable. This still requires the capacity at some stage to generate sufficient income to repay the debt. If not this is just a further burden to be met by future generations due to the past and present generation’s lack of financial prudence.

Another option is selling existing non-essential assets (say land) and use funds from those sales to reinvest in essential assets (such as infrastructure). This is a valid approach but difficulty arises where the assets sold are also a source of income (leasehold land). In these instances there may be a desire to compensate for this loss of income by demanding a high premium.

This premium when attached to land sales is problematic. In a free market there will always be someone who may have their reasons to pay above market price. However given that recent economic difficulties arose out of global businesses having debt in excess of the value of the assets they were secured against, what banker, accountant or financial adviser would counsel their client to become encumbered with such debt? I am sure there is an argument regarding appreciation of property over time but this is more about property speculation than business development.

None of these courses of action may be particularly palatable, but this is a conversation that all ratepayers need to participate in and one that will require a high level of understanding if our counsels are to come to a satisfactory solution to the allocation of these scarce resources.